On Thursday, Citi reaffirmed its positive stance on Airbus SE (AIR:FP) (OTC: OTC:EADSY), maintaining a Buy rating and a price target of EUR188.00. The endorsement comes despite market fluctuations experienced the previous day, which prompted commentary from the firm's analyst. The analysis highlighted two primary factors that are believed to influence Airbus' fair value: the long-term production rate of the A320 model and the current spot exchange rate between the US dollar and the euro.
The analyst pointed out that the market might be pricing Airbus shares based on an A320 production rate of 55 units, just slightly above the rate of 53 achieved last year. This figure is notably lower than the target rate of 75 units. Additionally, the market exchange rate assumptions seem to reflect a dollar-to-euro rate of approximately 1.23, in contrast to the current rate of around 1.07.
The firm's position suggests that while short-term market sentiment is uncertain, the long-term value of Airbus is expected to propel the stock upwards over time. This outlook is based on the belief that the company's fundamental drivers, particularly the A320 production rate and favorable currency exchange rates, will ultimately be recognized by the market.
Airbus SE's stock performance is closely monitored by investors, as fluctuations in production rates and currency exchange rates can significantly impact the company's financials and stock valuation. The reaffirmation of the Buy rating by Citi indicates confidence in the aerospace giant's potential for growth, despite recent market reactions.
In other recent news, Airbus has seen a series of adjustments in its financial projections and operations due to various challenges. The European aerospace corporation experienced an unexpected guidance cut, leading to a decrease in its share price and causing financial services company Jefferies to lower its price target for Airbus from €190 to €155. Despite this, Jefferies maintains a 'buy' rating on Airbus, suggesting that the current valuation still presents an investment opportunity.
On the operations front, Airbus is poised to acquire four plants from Spirit AeroSystems (NYSE:SPR), which are central to Airbus aircraft production. This development comes amidst engine supply shortages causing delays in the production of narrowbody jets, leading to a decrease in the company's profit forecasts and a trim in its 2024 delivery target.
In terms of analyst adjustments, Berenberg reiterated its sell rating on Airbus following a significant profit warning issued by the company. JPMorgan reduced Airbus's price target to €172 due to supply chain issues and a profit warning, while Deutsche Bank downgraded Airbus's stock from Buy to Hold, lowering its price target to €155. However, Morgan Stanley maintained its Overweight rating on Airbus with a steady price target of EUR190.00.
Airbus has also revised its delivery guidance by about 4% to 770 aircraft for fiscal year 2024 due to these supply chain challenges. The company's earnings before interest and taxes (EBIT) forecast for FY24 has been reduced by approximately 20%, with free cash flow (FCF) expectations trimmed by about 13%. Amidst these changes, Airbus is planning to enforce mandatory weekend overtime at its A220 plant near Montreal to address ongoing production delays.
Lastly, Airbus is under investigation by the U.S. Federal Aviation Administration (FAA) for the use of counterfeit titanium parts in their jets. All these developments highlight the recent challenges and adjustments Airbus has had to make.
InvestingPro Insights
Analyzing the latest data provided by InvestingPro, Airbus SE (EADSY) presents a compelling case for investors considering the aerospace sector. The company boasts a robust market capitalization of $109.97 billion, reflecting its significant presence in the industry. Despite recent market volatility, Airbus holds a key advantage with more cash than debt on its balance sheet, an InvestingPro Tip that suggests financial stability and resilience. Additionally, the company has demonstrated a commitment to shareholder returns, having raised its dividend for three consecutive years.
InvestingPro Data indicates that Airbus has a Price/Earnings (P/E) ratio of 26.36, which is relatively high compared to near-term earnings growth, potentially signaling caution for value-oriented investors. However, with a Revenue Growth of 13.65% over the last twelve months as of Q1 2024, the company showcases its ability to expand its top-line figures. Moreover, Airbus has been profitable over the last twelve months, aligning with the positive outlook shared by Citi's analyst.
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